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  Straits Times 22 May 07
S'pore looks to a variety of energy sources to stay ahead of the curve
By Ong Soh Chin

SINGAPORE, with its limited resources, has always been good at staying ahead of the curve when it comes to matters of basic survival.

Yesterday, amendments were made to the Gas Act, with the Government further liberalising the industry here and guaranteeing all players open and non-discriminatory access to the entire gas pipeline network in Singapore.

Also coming under the ambit of the Act were regulations on the market structure and security of the future liquefied natural gas (LNG) plant, slated to be completed by 2012.

To the layman, LNG is just a series of random letters. To the energy industry, however, LNG, which does not need a pipeline to be transported, is the new kid on the block.

Traditional piped natural gas (PNG) is old news. At about 1/614th the volume of natural gas at standard temperature and pressure, LNG is more cost-efficient to transport - in super-cooled liquid form - over long distances, using specially designed vessels and tankers.

When Singapore's future LNG plant is ready, it will have the ability to receive this gas, heat it and expand it for regular energy use.

There are many reasons for Singapore to bank on LNG. But the chief reason is what energy insiders call 'security of supply'. This became a buzzword last year when Russia's monopolistic Gazprom threatened to cut off the gas supply of first Ukraine and then Belarus.

Simply put, LNG reduces a country's dependence on its neighbours for gas. Because it can be shipped, LNG can now be sourced from countries far away.

Singapore felt the dramatic effects of a gas disruption in June 2004 when a technical fault resulted in a cessation of supplies from Indonesia, plunging half of the island into a blackout for a day.

Currently, about 80 per cent of Singapore's supply of PNG comes from Malaysia and Indonesia's West Natuna fields. These PNG contracts are due to expire in 2022.

However, last year, Singapore's Energy Market Authority commissioned a study by Tokyo Gas Engineering Company, which noted that the West Natuna reserves could start to deplete by 2016, and Indonesia might reduce its gas exports to feed its growing energy demand.

With LNG eliminating the need for a pipeline to transport gas, Singapore could conceivably get its future supply from other countries, such as Australia, Qatar and Iran - the last two being countries with which Singapore has strengthened ties in the past few years.

The study by Tokyo Gas recommended that Singapore build an LNG terminal to receive 3 million tonnes of LNG per year. This is equivalent to a capacity of about 2 billion cubic metres or about 30 per cent of Singapore's 2005 consumption of 6.5 billion cubic metres, according to a report by Argus Media Group, an energy market data provider.

While the LNG plant will cost an estimated $500 million - likely to be funded by public and private sector interests - it is expected to pay off in the long term, especially with recent trends in the energy market.

The Government had actually set aside land for the terminal in September 1999 at Tuas View. But the project was stalled for several years because, at the time, the cost of the terminal would make LNG more expensive than PNG.

But now, with more players coming in, the once prohibitive costs of shipping and processing LNG have come down, even as rising gas prices have made PNG less competitive. Also, as more new sources open up and more processing plants are built, industry experts predict a buyer's market for LNG by 2010.

Currently, the biggest buyers of LNG are Japan, Taiwan and South Korea, with China, India and the United States also moving up the ranks.

To enjoy the benefits of such competitive forces, Singapore needs to keep its gas market open.

Yesterday, Minister of State (Trade and Industry) S. Iswaran said liberalisation of the market, which began in 2001, has already borne fruit. 'Greater competition in the electricity market has led to downward pressure on price, and has helped to cushion the impact of high oil prices on our electricity tariffs. For example, although fuel oil prices have increased by 71 per cent over the six years from April 2001 to April 2007, our household electricity tariffs have decreased by 5 per cent over the same period,' he said.

About four-fifths of Singapore's electricity is currently fuelled by natural gas. As the population expands and new ventures like the two integrated resorts materialise, demand will only grow.

All this does not necessarily sound the death knell for PNG.

While there is excitement now about LNG, it is still a new market tinged with some uncertainty. What it offers Singapore is flexibility and the reassurance of a continuous supply of energy should one source be disrupted.

Having the luxury of choice, as any strategist will attest, is vital to staying ahead of the curve.
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